Cleared Balance on 5+ Credit Accounts.. Close them??

daver33
daver33 Posts: 2 Newbie
Combo Breaker First Anniversary
in Credit file & ratings
Hi all,

I was rather silly for the last 10+ years and continued to spend beyond my means. Bouncing a large debt around between various cards/loans in order to "manage" it.

The interest on such an arrangement was stupid, and it would have taken me upwards of 10-15 years to clear the balance.

I've recently come into a position where I have the entire sum of the complete debt at my disposal, for reasons I wont go into here. I proceeded to clear down all store cards, loans and credit cards, along with my main current account's overdraft.

This consists of:
3x Credit Cards
2x Store Cards
2x Personal Loans
1x Overdraft

They are now all at zero balance (or turned off in the case of the overdraft).

Now my questions is, in order to increase my credit rating (which arguably isn't extremely poor right now anyway), is it better to leave the LARGE amount of credit available to me and "open". Or will I be rewarded better in the rating by completely closing and shutting down the currently open credit accounts?

Thanks in advance,
Dave.

Comments

  • hunt85
    hunt85 Posts: 332 Forumite
    First Anniversary Combo Breaker
    I recently did the same, cleared off various payday type loans, credit cards and other finance, they were all always perfectly kept up with payments etc.. My credit score went from very poor to the top of fair in 1 month by paying them off AND closing them all down. Definitely close them! I've now just been approved for a mortgage.
  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
    First Anniversary Photogenic Name Dropper First Post
    Leave the credit ards as they are and ignore your credit score. Remember to use them regularly and clear in full.

    Close the store cards if you want to.
  • daver33
    daver33 Posts: 2 Newbie
    Combo Breaker First Anniversary
    Conflicting answeres there! Haha..

    Personally, I always thought it was better to be able to demonstrate to lenders that you can "use" credit effectively without defaulting. Rather than simply having no available credit and being an unknown risk.

    So I'll probably go with the advice from the second reply, and keep most of the credit cards open, using them occasionally for regular purchases, clearing the entire balance monthly.

    Thanks.
  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
    First Anniversary Photogenic Name Dropper First Post
    Exactly. Show you can handle credit- not be afraid of it.
  • hunt85
    hunt85 Posts: 332 Forumite
    First Anniversary Combo Breaker
    Thats true but just use 1..having lots of available credit even if you're not using it can you against you for example with a mortgage application! This is because of the risk that you COULD go and max them all out. Close some, you will see an improvement.
  • datlex
    datlex Posts: 2,239 Forumite
    Name Dropper First Anniversary Combo Breaker First Post
    daver33 wrote: »
    Hi all,

    I was rather silly for the last 10+ years and continued to spend beyond my means. Bouncing a large debt around between various cards/loans in order to "manage" it.

    The interest on such an arrangement was stupid, and it would have taken me upwards of 10-15 years to clear the balance.

    I've recently come into a position where I have the entire sum of the complete debt at my disposal, for reasons I wont go into here. I proceeded to clear down all store cards, loans and credit cards, along with my main current account's overdraft.

    This consists of:
    3x Credit Cards
    2x Store Cards
    2x Personal Loans
    1x Overdraft

    They are now all at zero balance (or turned off in the case of the overdraft).

    Now my questions is, in order to increase my credit rating (which arguably isn't extremely poor right now anyway), is it better to leave the LARGE amount of credit available to me and "open". Or will I be rewarded better in the rating by completely closing and shutting down the currently open credit accounts?

    Thanks in advance,
    Dave.
    The loans will automatically close.

    Why do you need 5 credit cards? (Nowadays many store cards are reward credit cards that have benefits linked to a specific store) Personally I have two cards, one is a store MasterCard. I would say it is fine to have a credit card or more. What is important is how you use them. 4 or 5 just in case credit cards are pointless.

    Think about where you spend, and whether any of the cards reward you for shopping either there or give you vouchers to spend there (NB do not spend extra than you would normally just use the best method of payment at your disposal). Credit cards should always be a means of payment not a source of funds. It should benefit you to spend on them (e.g.section 79 on high value items, rewards, cashback, monthly stoozing (spending on card but holding money in interest earning account to cover the bill IN FULL)

    If you are not currently using and paying them off IN FULL then unfortunately they are a source of funds. (NB a credit card held for holidays due to preferential rates when sending overseas and used once or twice a year should be considered as used for this)

    Well done in clearing the debt.
    Paid off the last of my unsecured debts in 2016. Then saved up and bought a property. Current aim is to pay off my mortgage as early as possible. Currently over paying every month. Mortgage due to be paid off in 2036 hoping to get it paid off much earlier. Set up my own bespoke spreadsheet to manage my money.
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